Middle East and North Africa Concentrating Solar Power Knowledge and Innovation Program

The Sun Heats-up Morocco’s Economy

7th March 2018

By Radia Lahlou

Morocco’s economic fortunes have long been tied to the sky’s bounty: sunshine and rain. Indeed, the agricultural sector represents about 15%[i] of the country’s GDP, almost four times the global average[ii]. Now Morocco’s sun also provides another form of wealth: solar energy.

The construction of solar plants has boosted the local economy by providing jobs and creating demand for components made in Morocco, with many recent projects exceeding the minimum 30% local content requirement. In addition, solar energy is contributing to Morocco’s prosperity by allowing savings on energy imports and reducing the balance of payments’ sensitivity to fossil fuel prices.

Reducing dependency on energy imports

Morocco is a net energy importer, sourcing about 95 % of its primary energy needs from abroad. Its balance of payments is therefore highly sensitive to oil prices, as displayed in figure 1.

Fossil fuels still dominate Morocco’s power generation mix, despite a significant share of hydroelectricity, as illustrated in figure 2. In 2009, the government set national targets to increase the share of renewable energy to 42% of installed capacity by 2020, which in 2016, was increased to 52 % by 2030. Alongside fossil energy subsidy reform, launched in 2012, increasing the share of renewables in the energy mix will further mitigate the country’s balance of payments’ sensitivity to fossil fuel prices.

According to a 2016 study by rating agency Moody’s[iii], the CSP part of Noor Ouarzazate complex (510 MW CSP, 72 MW PV) alone can contribute to annual energy import savings of up to 0.3 % to 0.5 % of GDP. In this study, Moody’s used the price of a barrel of oil to simplify the conversion of Tons of Oil Equivalent (TOE) savings into US dollars. The complex’s 510 MW CSP plants with storage will eventually save 1 million tons of oil equivalent (TOE) annually. At $ 96 per oil barrel, this would yield annual savings of around 0.5% of Morocco’s GDP. Such high oil prices were last seen in 2014 and are expected to return in the near future[iv].

On track for the target of 2000 MW of solar by 2020, the Moroccan Agency for Sustainable Energy (Masen) announced that the Noor Ouarzazate complex is expected to be fully operational by end of June 2018. At the same time, Masen is reviewing tenders for the first phase of the Noor Midelt complex, comprising two hybrid CSP/PV plants of 400 MW each, to be awarded by end of 2018. Extrapolating these numbers to the total 2000 MW solar installed capacity planned for 2020, the corresponding savings on fuel imports would reach 1.86 % of the GDP in 2021.

Net energy importers across the region, including Tunisia, Jordan and, to a certain extent, gas-producing Egypt could also reap similar benefits by installing CSP and PV. It remains to be seen whether fuels savings, in addition to the rapid drop in solar prices, will be enough to trigger a rush of new solar projects across the region.

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The Middle East and North Africa Concentrating Solar Power Knowledge and Innovation Program aims to accelerate CSP investments in the region by addressing knowledge and awareness gaps, linking projects with sources of finance and technical advice, and promoting innovation. This three-year program was launched in late 2016 by the World Bank with support from the Climate Investment Funds (CIF).

The Center for Mediterranean Integration (CMI) is a multi-partner platform where development agencies, Governments, local authorities and civil society from around the Mediterranean convene in order to exchange knowledge, discuss public policies, and identify the solutions needed to address key challenges facing the Mediterranean region.

About CIF

Since 2008, the Climate Investment Funds (CIF) has built a portfolio of over 300 investments in 72 developing and middle-income countries to scale up renewable energy and clean technologies, mainstream climate resilience in development plans and action, and support the sustainable management of forests. Although most programs and projects are still in the early stages of implementation, our funding has already contributed to over 3 gigawatts of new renewable energy capacity and close to 3 million people are already benefiting from CIF-supported climate resilience measures. Our experience shows that with strong leadership, the right technical and financial support, and inclusive partnerships, difficult investment decisions can be made with tangible results.